Saturday, January 23, 2010

Decade Returns Are Strong Following Decades Where Returns Are Weak

The decade of 2000s is now being referred to as the "lost decade". This past decade was only the second one to record a negative return since the negative returning decade of the 1930s. Strong equity market returns tend to follow decades that recorded weak returns. For example, after the worst 10-year periods in the 1930s and 1970s, the market rose 9% and 15%, respectively, on an annual basis over the next decade.

An important factor for investors to consider is to establish an appropriate risk tolerance and time horizon for their investments as the stronger returns can occur later in the decade. The second slide in the below report displays the 10-year rolling returns for the S&P 500 Index since the 1930s.
Lost Decade

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